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tdlawyer
tdlawyer, Lawyer
Category: Law
Satisfied Customers: 1096
Experience:  11 years experience of general practice.
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I have a company that had only one share that i owned the director

Customer Question

I have a company that had only one share that i owned the director has purcased 3 more shares and divided them up so he now has 50% of the company we have had no shareholders meetings i have looked at the articals of association they relate to section 80 of the 1995-1998 can he just take half of my company without my consent
Submitted: 3 years ago.
Category: Law
Expert:  tdlawyer replied 3 years ago.

tdlawyer :

Hi thanks for your question.

tdlawyer :

My name isXXXXX can help with this.

Customer:

what should i do he is making all the desiccations for the company and i do not know how to remove him

tdlawyer :

Okay. Were the shares issued to start with or did he seek to issue new shares himself?

Customer:

He issued them himself there was only one share that i owned

tdlawyer :

Okay. But what I need to know is whether the company had the shares ISSUED to start with prior to them being ALLLOTTED to the director/shareholder.

tdlawyer :

IN other words, did the company have the share capital to distribute or did the shares need to be created?

Customer:

the shares needed to be created

tdlawyer :

Okay. Then it seems to me that this director had no right to do as he did. The board of directors cannot themselves alter the share capital of the company to do this.

Customer:

what do i do

tdlawyer :

Further, purporting to do this is likely to be an offence under s.549 of the Companies Act 2006, rendering him liable to a fine.

Customer:

do i have to report him to companies house and will he still be aloud to be a director

tdlawyer :

You can report him yes, and yes, he will still be permitted to be a director unless and until the DTI disqualifies him. This usually only happens when a company goes into liquidation and the liquidator lodges a report with the DTI.

Customer:

what about the company he has agreed to a lot of financial commitments that will leave the company vulnerable if he leaves

tdlawyer :

It sounds like he has breached his duties as director to the company. This means the company can bring a claim against him, which you would be able to force to happen as the only true shareholder. The problem in all honesty is that these types of legal claim can be expensive and complicated and cost a not insignificant amount in legal fees to resolve. If it's a new or small business, although not the best answer, it can something be better to walk away. If it's worth fighting for though, from what you've said here, I do think you have a decent claim.

Customer:

would he get his legal fees paid he was appointed the only director but he is claiming to be the MD

tdlawyer :

The company should not pay his legal fees no, it's an action against him personally that would be issued. It has nothing to do with the company, and the company would be his opposition!

tdlawyer :

So he would have to fund his own legal fees.

Customer:

would it be better just to report him and then if the company survives that would be a bonus

Customer:

is there a time limit as i only found out about the shares last week and he has done this in December last year

tdlawyer :

From a financial perspective, yes, probably.

tdlawyer :

The limitation period is 6 years, so you have lots of time to take action.

Customer:

Thank you how much is the fine for him and would the shares just revert back to how they were

tdlawyer :

The shares don't automatically change back, and I'm not sure what the fine is, but I can research it if you need to know?

Customer:

would he be able to keep half of the company would it not come under fraud

tdlawyer :

I've found the answer: it's potentially an unlimited fine.

tdlawyer :

No, he doesn't own half the company, he just claims to. He has no authority to do as he has done, and has no shares therefore.

tdlawyer :

Directors and shareholders are different things. A director cannot simply decide to create shares, this required the consent of the shareholders - i.e. you! You didn't give consent, and hence, the share issue isn't valid.

tdlawyer :

Does this answer your question, do you need me to focus on any part of this for you?

Customer:

Would this be classed as a criminal offence

tdlawyer :

It might be - depending on his intentions etc, so it's worth reporting to the police, especially since you have nothing to lose by doing so.

Customer:

Thank you

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